North American OCTG industry remains tight
Tubular demand has remained resilient for the North American steel industry, even as other sectors have either contracted or showed signs of contraction.
Demand for oil country tubular goods (OCTG) products is expected to remain strong going into 2023, as higher crude oil prices pushed the US rig count last week to its highest since March 2020.
Tubular producer Tenaris is planning to increase its US OCTG production after the US government this month imposed antidumping duties of 78.3pc and 44.93pc on OCTG imports from Argentina and Mexico, respectively.
The company operates 11 manufacturing sites and four service centers in the US, and another two manufacturing plants in Canada, according to its 2021 sustainability report.
Demand is expected to remain strong heading into the coming year despite robust imports for the year so far. The US imported just under 3.9mn metric tonnes (t) of pipe and tube products over the first nine months of 2022, compared with just under 2.8mn t in the same year earlier period, according to the latest official statistics from the Department of Commerce. Since then, preliminary data showed imports in October of 387,000t, up from 352,000t a year earlier.
French tubular steelmaker Vallourec expects North American OCTG supplies to remain tight going into 2023.
At the same time, integrated steelmaker US Steel boosted its tubular division output by 48pc to 173,000 short tons (st) in the third quarter from a year earlier, as the division operated at a 76pc utilization rate, up from 52pc a year earlier.
The active drilling rig count in the US was at 782 for the week ended 18 November, up by 39pc from a year earlier, according to data from oil field services firm Baker Hughes.
The Argus West Texas Intermediate fob Houston price has remained above $80/bl for most of 2022, and has been buoyed by supply shocks related to the war between Russia and Ukraine. It has fallen by 37pc since hitting a peak of $127.81/bl in early March, closing at $80.95/bl today.
This mostly contrasts with the wider steel market in which cooling demand has lowered lead times, prompting mills to caution over the near-term price and market outlooks.
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Yara first-quarter gas consumption higher on year
Yara first-quarter gas consumption higher on year
London, 29 April (Argus) — Europe's largest fertiliser producer Yara's European gas consumption in the first quarter was up by 26pc on the year, but remained far lower than in the second half of last year. Norway-based Yara's gas consumption across Europe in January-March totalled 29.2 trillion Btu, well above the 23.1 trillion Btu a year earlier, but drastically down from 37.5 trillion Btu in the fourth quarter last year, the company's latest quarterly report shows. Yara did not report its European ammonia production for the first quarter, but the company's global output totalled 1.74mn t, up from 1.38mn t a year earlier. Yara's first-quarter European gas consumption fell from the preceding three months, despite its average European gas costs falling to $11.70/mn Btu from $13/mn Btu. The firm's European gas costs have declined sharply since peaking at $34.50/mn Btu in the third-quarter 2022, when European wholesale prices hit all-time highs ( see price graph ). Yara's quarterly spending on European gas supplies fell to $343mn in January-March, the lowest since at least summer 2021 when the company began reporting this data, and around one third the $1.08bn peak in April-June 2022. Yara's European gas consumption also fell despite a 37pc annual increase in total fertiliser deliveries in Europe . Lower curtailments, improved production economics and "volume catch-up" had supported output, Yara said. But while European deliveries improved on the year, they remained "below normal" — particularly for nitrates — and Yara sourced a larger share of its European deliveries from its global plants, the company's chief financial officer Thor Giaever said. Yara had hinted earlier this year its ammonia assets might run at 90pc or more of capacity as the company expected to boost production this year . But one explanation for the lower gas demand compared to the previous quarter is Yara may be maximising production at more efficient plants like Sluiskil in the Netherlands and Brunsbuttel in Germany, while ramping down less efficient plants, allowing the company to maintain or increase production while consuming less gas. Yara last year curtailed 19pc of its European ammonia capacity , turning towards greater imports of ammonia to replace the lower production. And that remains key to Yara's business plans , which the company said last week focused on "further strengthening operational resilience and flexibility". Argus assessed European ammonia production prices based on the TTF front-month price at roughly a $100/t discount to northwest European import prices in its last weekly assessment on 25 April, suggesting a still-significant financial incentive to produce ammonia domestically. The European fertiliser market remains under pressure by large volumes from Russia, meaning Europe has swapped an energy dependency on Russia for a food dependency, chief executive Svein Tore Holsether said, echoing previous statements . Comparing global assets Yara consumed 54.4 trillion Btu of gas globally in January-March, down from a multi-year high of 61.9 trillion Btu in October-December ( see consumption graph ). European consumption accounted for roughly 54pc of Yara's global gas demand in January-March, well down from 61pc in the previous quarter. And Yara spent $485mn on gas worldwide in January-March, 71pc for European supply, a lower proportion than at any other point since 2021. Yara's global average gas cost was $8.90/mn Btu in January-March, 24pc below its reported European cost. That discount has been a significant driver for Yara and others to increase production abroad rather than in Europe over the past two years. Yara forecasts its European gas costs at $9.70/mn Btu and $10.50/mn Btu in the second and third quarters of this year, respectively, holding well above its global average gas costs of $7.70/mn Btu and $8.40/mn Btu during those same periods. Globally, the firm aims to produce 8.6mn t of ammonia in 2025, significantly up from 7.8mn t in 2023, it said. By Brendan A'Hearn Yara European vs global gas costs $/MMBtu Yara European vs global gas consumption million MMBtu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Service firms talk up long-term gas prospects
Service firms talk up long-term gas prospects
New York, 29 April (Argus) — Leading oil field service firms are bullish on the outlook for natural gas demand in coming years even though the fuel remains stuck in the doldrums for now, with US prices near pandemic lows amid oversupply after a mild winter. "This is the age of gas," Baker Hughes chief executive Lorenzo Simonelli says, adding that global demand for the power plant and heating fuel is due to climb by almost 20pc through 2040. "Gas is abundant, lower emission, low cost, and the speed to scale is unrivalled," he says. Halliburton also sees natural gas as the "next big leg of growth" in North America, driven by demand for LNG expansion projects, although its current plans do not envisage any comeback this year. Given a shrinking fracking fleet and lack of new equipment being built, the stage is set for an "incredibly tight market" in future, chief executive Jeff Miller says. A recovery in natural gas activity in the US may not happen until the end of this year or even 2025, Liberty Energy chief executive Chris Wright says. "Customers need to see that prices have firmed, that export volume demand actually is pulling upward at a meaningful rate," he says. On recent first-quarter earnings calls, service firms were upbeat about international growth prospects in the face of escalating geopolitical tensions in the Middle East. The backdrop remains one of growing demand for oil and gas and an "even deeper focus" on energy security, according to Olivier Le Peuch, chief executive of SLB, the world's biggest oil field service company. SLB, formerly known as Schlumberger, expects overseas growth momentum to make up for a slowdown in North America this year. "The relevance of oil and gas in the energy mix continues to support further investments in capacity expansion, particularly in the Middle East and in long-cycle projects across global offshore markets," Le Peuch says. But results in North America will be depressed by the combination of low gas prices, capital discipline and producer consolidation. International rescue Halliburton expects international revenue growth in the "low double-digits" for the full year, with some margin expansion given the tight market for equipment and labour. Steady activity levels are seen in North America after land completion activity bottomed out in the fourth quarter of 2023 and rebounded in the first quarter. "The world requires more energy, not less, and I'm more convinced than ever that oil and gas will fill a critical role in the global energy mix for decades to come," Miller says. The positive outlook is reinforced by customers' multi-year activity plans across markets and assets. Baker Hughes forecasts "high single-digit growth" when it comes to the outlook for international drilling and completion spending this year. But customer spending in North America is expected to fall in a "low to mid-single-digit range" when compared with 2023. "We continue to anticipate declining activity in the US gas basins, partially offsetting modest improvement in oil activity during the second half of the year," Simonelli says. Beyond 2024, upstream spending is seen growing further across international markets, albeit at a "more moderate" pace than seen in recent years, according to Baker Hughes. SLB paced a decline among oil service stocks at the end of January when state-controlled Saudi Aramco scrapped plans to increase crude output capacity to 13mn b/d from 12mn b/d. But Saudi Arabia has stepped up its plans to boost gas output, by 60pc by 2030. This new energy mix was not anticipated six months ago, but it will "not have a natural impact on our ambition for growth" in Saudi Arabia, Le Peuch says. And Saudi gas plans will require substantial investment in gas infrastructure, which is a "long-term net positive" for Baker Hughes, Simonelli says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Production, patience driving Canada’s oil sands profits
Production, patience driving Canada’s oil sands profits
Calgary, 29 April (Argus) — Canadian oil sands operators enjoying firm profits on strong production are getting ready for a major boost when a new export pipeline to the Pacific coast goes into commercial service this week. The federally owned 590,000 b/d Trans Mountain Expansion (TMX) remains on track to start operations on 1 May, and the line has already started to bear fruit. More than 4mn bl of Canadian crude is being pushed into the C$34bn ($25bn) expansion for linefill, helping to work down inventory levels in Alberta while lifting local prices relative to international benchmarks, as intended. The largest four oil sands companies — Canadian Natural Resources (CNRL), Cenovus, Suncor, and Imperial Oil — are all shippers on the expansion. They closed 2023 with a new production record of 3.6mn b/d of oil equivalent (boe/d) combined in the fourth quarter, and are targeting further increases as they plan to fill the new pipeline. About 80pc of their output comes from their core oil sands businesses, with the balance from natural gas and offshore projects. The higher output compensated for a slight dip in prices, helping to push profits higher. First-quarter 2024 results are likely to be a similar story, but it is the second quarter when producers look ready to shine as prices climb to multi-month highs. A combined profit of C$26bn in 2023 was a stellar result for the big four oil sands operators, despite a 25pc decline from the record C$34bn set the previous year. Their massive projects are agnostic to daily price swings, instead focused on uptime, long-term fundamentals and capitalising on key step-changes such as the one TMX presents. Patience in the oil sands is key. TMX will cater largely to heavy crude producers, which saw diluted bitumen prices in Alberta rise only slightly quarter on quarter to $58/bl in the first quarter. But climbing global benchmarks in April and a shrinking heavy sour discount with the help of TMX linefill now has the outright price for the crude approaching $70/bl. This is above guidance given in 2024 corporate budgets, and far above oil sands operating costs that for some are as low as $12/bl. The TMX factor TMX will nearly triple the existing 300,000 b/d Trans Mountain system that connects oil-rich Alberta to the docks in Burnaby, British Columbia. The expansion was first conceived more than a decade ago with the intention of being operational by late-2017, but cost overruns and repeated delays put the project in jeopardy. Canadian producers that sought growth during that period of frustration are poised to take advantage of this new era of excess export capacity. CNRL, Cenovus and Suncor have been significant buyers in the oil sands in recent years, doubling down on the world's third-largest deposit of oil while many international companies fled amid regulatory uncertainty. The government itself enabled a foreign operator to leave Canada, buying the Trans Mountain system from Kinder Morgan in 2018. But as Prime Minister Justin Trudeau's Liberal party sees TMX to completion, and then the line's planned sale, it is also readying legislation towards something more on-brand for climate-concerned Ottawa: carbon capture. A carbon capture and storage (CCS) project spearheaded by Pathways Alliance — a consortium of the six largest oil sands producers — is awaiting federal and provincial help to push their proposal forward. Federal incentives are soon to become law, the Trudeau government said this month, with the expectation that tax credits will advance the massive C$16.5bn project and start to offset oil sands greenhouse gas emissions to meet net zero pledges for all parties involved. TMX represents a new era for Canadian crude producers, but so too does CCS, as it could attract even more investment into Alberta's oil sands region. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Japan's ferrous scrap exports slip in March
Japan's ferrous scrap exports slip in March
Shanghai, 29 April (Argus) — Japan's ferrous scrap exports declined sharply in March as import demand from Vietnam diminished, while the South Korean market remained bearish. Total exports in March retreated by 17pc on the month and by 10pc from the previous year, reaching 516,000t, according to Japan's customs data. Total exports dropped by 4.6pc on the year to 1.6mn t in the first quarter. Japanese scrap exporters encountered challenges because of declining overseas demand since March, as buyers became more cautious in the face of weaker-than-expected downstream demand recovery. Scrap exports will likely remain subdued in the coming months, according to trade sources. Vietnamese buyers were active in the seaborne market at the beginning of the year, but rising inventory levels and uncertainties in the steel sector outlook led them to step back after February. Exports to Vietnam in March dropped by 21pc on the month. The South Korean market is not expected to rise significantly in the near term as domestic scrap prices continued to fall, dropping by $50-60/t over the past three months. "South Korean buyers only fulfilled long-term contracts and stayed away from the spot market," a Japanese trader said. Exports to South Korea plummeted by 38pc to 470,000t in the first quarter. Exports to Taiwan dropped significantly by 41pc from the previous month as buyers were more focused on purchases of containerised scrap. Exports to Malaysia remained steady above 30,000t in March, while exports to the Philippines decreased from 34,000t in February to 13,000t. But a depreciation of the Japanese yen allowed exporters to offer relatively more competitive prices compared to other suppliers, with buyers price sensitive given a sluggish steel market. The yen started to weaken in March, reaching above ¥155:$1 at the end of April from $146.8:$1 in mid-March. Japan ferrous scrap exports (t) Country March % ± vs Feb % ± vs Mar '23 Jan-Mar % ± on year Vietnam 210,014 -20.7 20.7 683,821 48.0 South Korea 156,851 -9.8 -32.2 469,644 -38.1 Bangladesh 43,755 13.8 N/A 91,205 79.0 Taiwan 35,329 -40.8 -62.8 140,755 -28.8 Others 70,023 -20.6 -7.2 213,587 3.0 Total 515,971 -17.4 -10.4 1,599,011 -4.6 Source: Japan customs Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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